How to Boost Your Wealth by Investing in Gold and Silver

Reasons for Physicians to Invest in Gold and Silver

Professionals suggest investing in gold and silver because it’s an asset class. Depending on your timing, it can be either a good investment or bad investment for physicians. It all depends on the “why”!

What is your motivation for investing in gold and silver?

From a psychological standpoint investing in gold and silver can be extremely comforting. It is extremely portable. When you carry gold coins while traveling you have instant liquidity–across markets!

Other than the comfort factor of investing in gold and silver there is really no difference as to when you should buy it. It is just like any other stock.

Investing in Gold and Silver: The Smell of Fear

Other reasons for investing in gold and silver are for protecting a portion of your portfolio against inflation. There is also one very bad reason for investing in gold and silver.

You may be thinking, “How could there possibly be a bad reason for investing in gold and silver”?

The answer is when your reasoning and your decision for investing in gold and silver are both based on fear.

Have you thought about where the fear is coming from? Are you getting either a subliminal or direct message of impending doom? Where is it coming from?

The answer might be Uncle Sam. Our government has a history of using fear as a tactic for getting people interested in investing in gold and silver. Or, it might be analysts and commentators attempting to scare people into investing in gold and silver by making references to a financial market collapse. It has happened before.

For example, relative other assets, gold did very well during the financial collapse in 2008. There is no other market that does as well when the spotlight of fear is shining on it.

Who are the people investing in gold and silver?

Investing in Gold and Silver: Gold Investors

As you’ve read in my prior blogs, I am very interested in the psychology of people and their relationship to money. I am curious about what motivates them. In this case, I wanted to know about the type of people who are investing in gold and silver.

It turns out that the people who invest in gold tend to fall into several psychological categories. These groups have remained steady since the 1970s when our government disassociated the value of the dollar from gold.

The first group believes the world as we know it is ending

The second group is a conservative investor

The third group are the traders

The fourth group are the collectors

The first group is planning to use gold as a safeguard in the event our currency system crashes. The second group holds a small portion as an investment. The third group invests in gold for capital gains. They may consider themselves to be bullish (believing the price of gold will rise) or bearish (believing the price of gold will fall). However, their beliefs about the market are not an indication of what action they might take.

You may feel like writing a will is only for people who have things to leave behind. For most physicians, the task of paying down student loans is long and often feels like there is no light at the end of the tunnel. When the road is long, the end never feels near. Find out what physicians need to know about estate planning.

The fourth and final group are coin collectors.

I know, you are here to learn about financial independence and building your wealth–not hobbies!

So, unless you are someone who falls in one of the four groups of people who are investing in gold and silver, you’ve probably never given gold or silver much thought. Or been conscious of anything to do with this topic.

Except for coin collectors. They’ve given investing in gold and silver plenty of thought.

Hasn’t almost everyone at least heard of coin collecting?

Is coin collecting for both fun and profit?

Investing in Gold and Silver: Coin Collectors

Coin collectors investing in gold and silver take up a good portion of the market. They may choose themed coins with a bullying content of one ounce of either silver or gold.

Why do people collect coins?

Where do they find these coins?

I started collecting coins when I was five with my grandpa. I’ve always been interested in coins. It’s almost like stamp collecting, I don’t think there are very many people left doing it. I would say most of the other coin collectors are a lot older than I am.

A collector may start collecting and investing in gold and silver according to a chosen motif. Examples are Nautical, ancient Rome, animals or a Star Wars theme. Maybe they have a variety of interesting pieces.

A collector has the choice of searching for old coins or buying newly minted coins. Places to search for old coins may include:

Check your pockets!

Walk around old abandoned houses with a metal detector (beware of going inside of an unstable building)

It’s exciting to finally come across a coin you’ve been intrigued with or searching for a long time. They are fun to look for and collect. But, if you are looking at coin collecting as a way to make a profit they are probably not a good investment.

The gold content or silver coin is going to have the value of the metal content for the relative market. You may spend $50 on a collectible coin that comes in a nice display box or on a limited edition. However, there is no guarantee you will make a profit when you decide to resell it.

Investing in gold and silver coins is a great hobby, It’s just not usually profitable!

Investing in Gold and Silver: Holding Gold

Experts have a golden rule of holding no more than 10% of your assets in gold. After all, gold is a commodity. The price of gold will depend on the supply and demand for it. If the US dollar has strength, the commodity market will be weak. And vice versa.

Are we talking about investing in gold and silver as the actual physical bar or part of the market?

Are you building a locker and storing food? You might choose to invest in an actual bar.

When you want to hold the actual bar of gold there are some things to think about and questions to ask:

Shipping costs

Research the dealer

Research the product

Where is it being held?

Who is backing the product?

What type of transaction confirmation is there?

If you choose an actual bar you will pay a premium relative to the gold price. And a disadvantage is the liquidity is diminished.

However, if you are comfortable with the markets instead of buying gold bars you might choose to invest there, instead of buying the physical gold bars!

You will want to get as close as possible to the value of the true market. To that end, you have the option of using an ETF.

Who wants to hold a Gold Eagle?

When investing in gold and silver American’s want to hold the Gold Eagle!

The bad news is it is one of the worst coins you can buy from an American perspective. The pricing is the same as when the eagle coin was first issued in the 1980s. That’s right 33 years ago!

There are no deals for the dealers. They pay the same price for each coin regardless of how many coins they buy and they don’t get anything under melt value.

A common rule of thumb in planning for retirement is that you need 70% of your current income to live the same or similar lifestyle during retirement. While this will not be the same across all professions, the good news for doctors is that the actual number is probably much less.

Let’s say I’m a dealer. I will pay 3% ($38 per coin). If another dealer comes to me, I’ll sell to him at a slight increase ($45). If a customer comes to me directly I will sell it for between $50 and $60.

This is harking back to high school economics, but think about the law of supply and demand, nobody is paying attention to the premium. Why? Because there is so much demand for the Gold Eagle and Silver Eagle.

The US mint has the mindset: If it’s not broke, don’t try to fix it.

The Gold Eagle coin if fine in the United States. However, other countries prefer a 24-carat gold coin–and the Eagle is not that.

So, if the Gold Eagle isn’t equal to the coins in other countries–which coin is?

[easy-tweet tweet=”Gold tends to trade inversely to the value of the US dollar, so be sure to know the market says @PeterHug” user=”physician wealth” url=”https://financialresidency.com/podcast/how-to-boost-your-wealth-by-investing-in-gold-and-silver”]

The US has the Buffalo which is a four nines gold coin which compares equally with the Royal Canadian Mint Gold Maple Leaf, the British Britannica, and the Australian kangaroo. They are all four nines gold coins.

The US Buffalo sells at the same rate as the US Gold Eagle–sometimes even higher. The dealers get their mark-up. It is the retail investor that pays an additional $30 or more.

An even better deal is to buy a gold bar. They can be traded for $15-$20.

Since the US mint is at 3%, it’s opened a window for the other sovereign mints to offer their coins on the US market. That discounts the Golden Eagle.

As a lifelong collector, I’m continually disappointed that the US Mint chooses not to be more competitive when it could.

Investing in Gold and Silver: Is Gold a Good Investment?

Investing in gold and silver can be a good investment. It will depend on the timing and momentum in the market. There are good times to invest and good times to pull back from investing in gold.

It will also depend on the balance of your portfolio.

You need to check your security market investments (stocks, bonds, and gold) every six months to see if they are lining up with your objectives. If they aren’t–you will need to calibrate them.

How did my portfolio get out of balance?

Think about the time when you bought the gold. Now think about what has changed in the market until now. The fluctuations in the market have affected the price of gold. Meaning it raised or lowered to a new percentage the gold represents in your portfolio. This throws your portfolio out of balance.

How on earth do I calibrate my investments portfolio?

That depends on how long it has been since you’ve assessed your portfolio.

You start with your expectations. Look at the difference in your portfolio’s current asset allocation and compare it where it should be.

Is the percentage more than your original allocation– then it’s too high for your portfolio, and you might need to sell some. Is the percentage too low? You might need to buy to restore balance.

You also take this time to reassess your portfolio in relation to your age, earnings, assets, your current situation and future goals. Consider your risk tolerance. All of these factors play a part.

Investing in Gold and Silver: The Call of Profit

Why are you interested in investing in gold and silver? Is it because you’ve done your research and you want to diversify your portfolio? Have you learned something from a reputable that convinces you that it’s a good move? Or are you listening to an analyst who has an ulterior motive?

The same analyst or dealer who wants to sell you gold or silver.

I’ve talked on my podcast and written on my blog many times about conflicts of interest. Here are some things to keep in mind:

Is someone wanting you to buy something or do something?

Is there a conflict of interest? Does the person have something to gain? A motive?

Keep in mind that an indirect suggestion is like subliminal advertising

Are they selling something?

Will they be compensated?

When you are making a decision about investing in gold and silver here are a few things to ask yourself:

Does investing in gold and silver make sense for my portfolio?

How does the market for investing in gold and silver work?

How risky is investing in gold and silver?

Do I understand the gold and silver market?

Do you feel like investing in gold and silver are a good idea? If you’ve invested in gold did you buy the physical bars or invest in the market? What choice did you make and why?

Be sure to share us with a physician friend or family that you know could really use good financial information! They’ll thank you later.